Motorola has made the latest in a string of acquisitions of small, often UK-based technology companies to bolster the key developments within its "seamless mobility" strategy.
TTPcom brings it products and expertise in three areas that are important to the current strategy - low cost phones, convergence and indoor coverage. It also brings a licensing customer base that includes Intel, TI and several Asian handset makers, which could enable Motorola to extend this revenue stream as Ericsson has done, as well as exploiting the technology for its own ends.
Most immediately, TTPcom provides applications and protocol stacks for building into reference platforms that will be important in two handset directions—multi-network convergence, embracing Wi-Fi, cellular, mobile TV and potentially WiMAX and others; and sub-$20 handsets for emerging economies.
In addition, it brings its new owner a stake in ip.access, a pioneer in 3G pico base stations that provide an alternative to Wi-Fi for indoor wireless coverage and fixed/mobile convergence.
All these are important areas for Motorola and the strong fit of TTPcom's developments with the Seamless Mobility program helps explain the high premium the larger vendor has paid for the lossmaking company.
Motorola has paid a huge premium to buy TTPcom, UK-based designer of handset reference platforms. At first, the price tag of £103m ($192m) looks over-generous for a company that saw a 36 per cent revenue decline in its last fiscal year to £37.2m ($69m) and a slide into the red with a loss of £32.3m ($60m). But this acquisition has nothing to do with revenues and everything to do with gaining valuable technology assets for not one but two of Motorola's most strategic growth initiatives – ultra-low cost handsets and fixed-mobile convergence.
The deal may also see Motorola – now free of its own chip business, spun off as Freescale – stepping up efforts to create a licensing revenue stream of its own, an approach currently bearing increased fruit for Ericsson.
Motorola has been using acquisitions of clever start-ups to bolster its attempts to create a highly differentiated technology platform in support of its "seamless mobility" approach, which embraces its handsets, wireless networks, convergence technologies and home broadband systems. These include Orthogon for wireless backhaul, MeshNetworks for metrozones, BenQ's Danish R&D centre and UK handset maker Sendo.
TTPcom's share price soared by 234 per cent to 34.5 pence on news that it was to join the Motorola group.
The most obvious gain for the larger company is TTPcom's applications management software and protocol stacks for handsets. The firm's design platform combines an applications framework for development with a suite of third party applications which are pre-integrated into the design to reduce development times.
TTPcom claims that by combining a software interface layer with established tools and around 50 preintegrated applications the design cycle for a mobile handset can be less than four months "from a standing start".
These technologies are licensed to chipmakers for inclusion in their reference platforms, with customers including Intel, Texas Instruments and NEC, plus device makers such as BenQ, LG, Panasonic and ZTE, plus Motorola itself.
TTPcom has included some of Motorola's favourite technologies in its stacks, including the UMA (Unlicensed Mobile Access) software for handoff between cellular and Wi-Fi or wired networks, and is heavily focused on convergence, developing reference designs for devices that could combine cellular, Wi-Fi, Bluetooth, DVB-H, FM radio and other links.
The two companies have also worked closely together on TTPcom's Ajar applications platform. It will be interesting to see how far Motorola chooses to expand its own third party licensing business, something that is becoming increasingly important to other vendors like Nokia and Ericsson to increase their revenue streams and margins as their core equipment comes under pressure, and as control of intellectual property increasingly becomes the key to differentiation and market leadership.
These reference platforms will also be important to Motorola's own handset development efforts, giving it control over a valuable technology for speeding its creation of highly converged cellphones. In particular, this will support the move into ultralow cost handsets, since TTPcom has developed a design for phones that would cost less than $20 to make.
Motorola has been the most whole-hearted of the handset majors in addressing the ultra-low cost market, which rivals like Nokia eye with more suspicion because of the potential impact on margins. Motorola is the lead vendor in the GSM Association's program to create cheap cellphones for developing economies and aims to overtake Nokia in market share on the back of these future high volume markets.